The Climate and Resiliency (EX) Task Force is organized around five workstreams. The workstreams are broken out by tab below to showcase the activities and topics covered under each group.
To outline the work state insurance regulators have been doing for years to regulate the industry and protect consumers, the National Association of Insurance Commissioners (NAIC) released the report, Adaptable to Emerging Risks: The State-Based Insurance Regulatory System is Focused on Climate-Related Risk and Resiliency.
The Pre-Disaster Mitigation Workstream, led by Commissioner Barbara Richardson (NV) serves to accomplish the following:
- Participate in multi-agency/stakeholder educational efforts on coverage gaps and pre-disaster mitigation related to climate risks.
- Incentivize insurer recognition of enhanced building codes in underwriting and rating.
- Continue consumer education and awareness on coverage gap and pre-disaster mitigation related to climate risks and natural catastrophe exposure, including possible strategic partnerships.
A list of mitigation measures was developed to describe actions policyholders can take to reduce their risk exposure for individual properties as well as state requirements for mitigation discounts.
The Workstream co-hosted a building code and mitigation workshop on March 17, 18 and 19 in conjunction with CIPR and the Federal Alliance for Safe Homes (FLASH).
The slides and recorded sessions are available here:
Center for Insurance Policy & Research State Resiliency Map - this page provides links to resources within each State Department of Insurance including disaster risk management and peril-specific information.
NAIC and Federal Resources on Resiliency, Disaster Preparedness and Response - this page provides links to pertinent information created by the NAIC as well as Federal Agencies.
International Code Council (ICC)
ICC develops model standards for building codes. They provide a family of codes for various uses including, not limited to, building (IBC), residential (IRC), energy, and Wildland Urban Interface Code (WUI). To learn more about the family of codes or the 3 year development lifecycle visit: https://www.iccsafe.org/products-and-services/i-codes/the-i-codes/.
To learn more about the codes in your state visit: https://codeadoptions.iccsafe.org/.
Federal Emergency Management Agency (FEMA)
"Building Codes Save: A Nationwide Study of Loss Prevention," November 2020. The study shows that modern building codes lead to major reduction in property losses from natural disasters.
|Findings of Modeled I-Code Savings||Number of Post-200 Structures||Money Saved, annual average|
|Hurricane Winds||9.2m||$1.1 billion|
National Institute of Building Sciences (NIBS)
NIBS Mitigation Saves: 2019 Report. Report findings show:
Adopting model codes save $11 per $1 spent.
Exceeding codes save $4 per $1 spent.http://2021.nibs.org/files/pdfs/NIBS_MMC_MitigationSaves_2019.pdf
A took for consumers to lookup the building codes used in their location:
ISO National Building Code Assessment Report, Building Code Effectiveness Grading Schedule (2019 Edition). Through the BCEGS program, ISO assesses the building codes in effect in individual communities and how those communities enforce their building codes.
FEMA Hazard Mitigation Assistance Division 2020 Year in Review, 2020.
The report provides a list of federal funding programs, tools and resources and success stories for the programs use in 2020.
FEMA Mitigation Planning Success Stories
National Institute of Building Sciences (NIBS)
NIBS Mitigation Saves: 2019 Report. Report findings show:
Federal mitigation grants save $6 per $1 spent.
Private sector building retrofit saves $4 per $1 spent.
Mitigating infrastructure saves $4 per $1 spent.
National Institute of Building Sciences (NIBS)
A Roadmap to Resilience, August 2020. The report spells out concrete incentives that reduce owner costs to make new and existing infrastructure more disaster resilient. Incentives include mortgage discounts, insurance premium discounts, tax incentives, grants, and other inducements. This roadmap was developed by the Multi-Hazard Mitigation Council of the National Institute of Building Sciences.
State Regulator Policy Avenues and Resiliency Playbook (NAIC)
Provides research and a framework for funding resiliency through grants and incentives. Includes a list of state actions regarding resiliency programs, insurance rate reduction and premium discounts.
Community Resilience Planning
Protect your home checklist
IBHS Preparedness Tips to Protect Homes and Businesses from Many Perils
NAIC Consumer Resources
The Solvency Workstream, led by Commissioner Kathleen Birrane (MD), serves to accomplish the following:
- Recommend enhancements to regulator solvency tools, including a risk framework for addressing wildfires and flood within the property/casualty (P/C) risk-based capital (RBC) formula, modifications to the Own Risk and Solvency Assessment (ORSA), the Financial Analysis Handbook and the Financial Condition Examiners Handbook. Develop climate risk stress tests and scenario analysis to evaluate potential financial exposure to both the physical and transition impacts of climate change. Provide scenarios, assumptions, and parameters for the stress testing exercise.
- Determine methodology for quantifying insurers' exposure to climate-related investments.
No comments are requested at this time.
The Climate Risk Disclosure Workstream, led by Commissioner Andrew R. Stolfi (OR) and Superintendent Elizabeth Kelleher Dwyer (RI), serves to accomplish the following:
- Consider modifications to the Climate Risk Disclosure to align with Task Force on Climate-related Financial Disclosures (TCFD) and promote uniformity in reporting requirements.
On March 11, 2022, the Climate Risk Disclosure Workstream adopted the revised Climate Risk Disclosure Survey which was also adopted, without change, by the Climate and Resiliency Task Force on March 21, 2022.
On Feb. 28, 2022, the Climate Risk Disclosure Workstream of the Climate and Resiliency (EX) Task Force took additional comments on their latest draft Climate Risk Disclosure Survey. Comment letters received are below:
On Nov. 15, 2021, the Climate Risk Disclosure Workstream of the Climate and Resiliency (EX) Task Force exposed the draft proposed redesigned Climate Risk Disclosure Survey for comment. The comments received were discussed on their open virtual meeting held on Wednesday, January 26, 2022. Comment letters received are below:
On Feb. 17, 2021, the Climate Risk Disclosure Workstream of the Climate and Resiliency (EX) Task Force requested comments on its guiding questions to determine objectives of NAIC Climate Risk Disclosures. Responses received by comment letter and a compilation of all responses received are below:
The workstream met to 1) hear the history and administration/collection process of the NAIC Climate Risk Disclosure Survey, 2) hear a presentation regarding the CIPR's report Assessing NAIC climate risk disclosure data, and 3) hear a presentation regarding phase 1 of the American Academy of Actuary's research on the NAIC Climate Risk Disclosure Survey.
Webex Recording: Climate Disclosure Work Stream-20210127
The workstream met to 1) hear a presentation from CERES regarding climate risk disclosure insurance recommendations, 2) hear a presentation on Zurich's climate risk disclosure process and preference, and 3) hear a presentation on AIG's climate risk disclosure process and preference.
The workstream met to 1) hear a presentation from RBC Global Asset Management Inc. regarding use of climate disclosures, 2) hear a presentation from Sustainalytics regarding their perspective of the information received through the NAIC Climate Risk Disclosure Survey, and 3) discuss questions being contemplated by the workstream to inform their future recommendations to the Task Force. Unable to share webex recording due to presenter legal constraints.
The Innovation Workstream, led by Commissioner Colin Hayashida (HI), serves to accomplish the following:
- Discuss the use of innovative insurance products that respond to climate-related risks.
Presentation from Guy Carpenter regarding community-based insurance.
Presentations from Bermuda Monetary Authority (BMA), Nephila Capital and Renaissance Re
Presentation from Global Parametrics (GP)
Presentation from Sola Insurance regarding tornado endorsement coverage.
Presentation from First Company of Hawaii (FICOH)
Presentation from Professional Solutions Insurance Company
The CIPR has a key issue page on parametric disaster insurance which includes a history of the product, it's use insuring against natural disasters, a summary of the benefits and concerns as well as links to several scholarly articles.
The A2ii is the implementation arm of the International Association of Insurance Supervisors (IAIS) on Inclusive Insurance generating and disseminating knowledge, building capacity, contributing to IAIS standard-setting, they foster learning and dialogue, support implementation at the regional and national levels, and participate in global advocacy processes. A2ii has developed several reports and issues papers on parametric/index-based insurance which can be found here: https://www.a2ii.org/en/knowledge-center/index-insurance.
March 25, A2ii hosted a webinar regarding index-based insurance. The webinar reviews the results of a survey conducted by A2ii collecting information from supervisors and other stakeholders on the current state of index insurance. The webinar can be viewed here: https://www.youtube.com/watch?v=04HSYqJKWgU
The report including survey results can be found here: https://a2ii.org/en/knowledge-center/....
The Office of the Commissioner of Insurance of Puerto Rico adopted Rule Number 103, entitled "Requirements for Submitting and Processing Parametric Catastrophic Microinsurance in Personal Lines."
This Rule is adopted for the purpose of establishing the regulatory scheme for microinsurance products that are directed at providing coverage for catastrophic risk in personal lines to foster access for all economic sectors in Puerto Rico to insurance coverage with low-cost premiums. This Rule is intended to provide a financial protection tool for persons who otherwise could not purchase traditional insurance. The primary purpose of microinsurance is to create an inclusive financial protection system that will encourage the development of private insurance products that are accessible to the low-income population.
The Technology Workstream, led by Commissioner James Donelon (LA), serves to accomplish the following:
- Apply technology, such as early warning systems and predictive modeling tools, to understand and evaluate climate risk exposures.
The Technology Workstream ushered a proposal for the NAIC/CIPR to create a Catastrophe Modeling Center of Excellence (COE). The Technology Workstream worked with the Solvency Workstream and the Pre-Disaster Mitigation Workstream in support of this initiative. If adopted, the role of the COE would be to 1) facilitate insurance department access to catastrophe modeling documentation and assistance distilling the information, 2) provide general technical education/training materials on the mechanics of commercial models and treatment of perils and risk exposures, and 3) conduct applied research analysis utilizing various model platforms to proactively answer the regulatory “so what” questions that may need to be addressed for regulatory resilience priorities. It is important to note that the support services offered through the COE will not take the place of individual state department of insurance activities involving CAT models such as model and rate filing review, nor would the COE approve vendor models.
Is the intent for the COE to become the primary point of contact between state insurance regulators and modelers?
No. As stated in the proposal, “identified support services will not be taking the place of state DOI activities involving CAT models, such as model and rate filing reviews, nor will the CAT Modeling COE be approving vendor models.” However, we do envision the COE providing access to CAT modeling expertise to support state insurance regulator understanding, training, etc.
Will state insurance regulators continue to be open to discussions with modelers (and insurers) about models?
Yes. In fact, the COE will seek to improve communication between state insurance regulators and modelers/insurers, supplying state insurance regulators with expertise and information to help facilitate such discussions.
How will the COE engage with interested stakeholders to remain transparent?
Most NAIC support resources interact with a committee for reporting and oversight. In this instance, at least for now, we propose that the catastrophe resource center will report to the Technology Workstream under the Climate and Resiliency (EX) Task Force, as well as coordinate with the Property and Casualty Insurance (C) Committee.
How will the COE work to ensure impartiality of vendor models?
The COE will make every effort to engage with all vendors willing to participate for all perils with available technical documentation. Furthermore, the COE will establish a governance structure to ensure that partiality is not provided to any model or vendor.
Would the COE be engaging to connect learnings from the CAT model to specific insurer rate-making, solvency, and/or business—i.e., strategic, reinsurance, claims management—decisions?
The COE support services will not take the place of state DOI activities involving CAT models, such as model and rate filing reviews, nor will the CAT Modeling COE be approving vendor models. The COE will work to understand models objectively from a general sense, not for individual rate filings or solvency assessments. We acknowledge that each insurer has their own risk profile that would need to be considered on an individual basis, which is outside the scope of the COE.
Would the kind of information the COE conveys be facts-based or would it include opinions or analysis?
The information provided to the state DOIs would be fact-based with relevant objective analysis, as requested. Providing this type of information to states highlights the importance of the placement of the COE within the NAIC’s independent research center, the CIPR.
What are regulatory “so what” questions in support service #3 of the proposal conducting applied research analysis?
State insurance regulators are responsible for maintaining well-functioning competitive insurance markets. Forward-looking models can be utilized to help analyze market performance, especially regarding the need for improved resilience. As stated in the proposal, CAT models are tools for catastrophe risk assessment. State insurance regulators can apply these tools in much the same way as the industry, albeit for regulatory resilience priorities. For example, models can be used to identify high-risk areas and where proliferation of home hardening activities can improve resilience to natural hazards, including hurricane, flood, severe convective storm, tornado, wildfire, and earthquake. Such mitigation activities are critical to reduce probable losses. Lower losses over time can improve the availability and affordability of coverage in the future. Applied research utilizing CAT models can demonstrate the economic value of mitigation activities. One description provided via public comments that we considered useful is, “conducting applied research analysis that utilizes or analyzes the potential to utilize CAT models to further public and private risk mitigation and resiliency efforts; benefits and opportunities at the individual consumer or business; or public agency at the community, regional, state, or national level.”
Regarding conducting applied research analyses utilizing CAT models, we would like to understand the research and support expectations from the COE on modelers.
We envision working with modelers on applied research activities as applicable. We are requesting funding to allow for modeler engagement.
Depending on the expected level of granularity for COE work, additional questions may be relevant, such as whether the COE (NAIC/CIPR) would need to be prepared to go to a hearing to testify or respond to discovery?
It is not anticipated that the COE would maintain granular information about individual insurer use of CAT models. The level of detail would be around the actual CAT model to provide education and training to state DOIs.
Will the COE be used to conduct research and analysis into the markets for CAT models. Will conflicts of interest or market failures distort the use of CAT models?
No. It is not envisioned that the COE would set out to conduct this type of research and analysis.
Given the complexity of models and breadth of expertise required to build and maintain them, there is a risk that any third party cannot adequately communicate the nuances and justification of models. Will the COE plan to coordinate model presentations from the modelers, rather than only relaying this information second-hand?
Yes. The COE would plan to coordinate model presentations from modelers.
How will information, observations, and/or questions about models be conveyed to state insurance departments? What kind of output will be generated?
We plan to hire a relationship manager responsible for communicating with the CAT model vendors and state insurance regulators. A regulator-only technology platform will help facilitate information sharing with state insurance regulators. Research output could take multiple forms depending upon the nature of the analysis undertaken.
What kinds of data fields will be included? Will others provide input into the design?
The data fields selected would be contingent on the models being used and the research project under consideration. Data fields would follow from model inputs and outputs.
Will the COE reviews and/or output be designed to be geography-specific?
Yes. That is possible.
Once a model has been reviewed, what renewal process is envisioned?
Models will not be reviewed, nor would they be posted on the state insurance regulator-only website. However, model technical documentation and information will be updated as new versions of the models are released.
How will the COE safe-guard intellectual property of the participating CAT model vendors?
All modeling documentation, access, and usage will be centralized and monitored through the COE via legally binding data use agreements. The NAIC has an extensive track record of experience in collecting and protecting proprietary information. The actual models will not be posted on the state insurance regulator website, only the model documentation will be posted.
Will modelers engage in discussions with the COE about specific models? Do you expect insurers would be involved in model-related discussions?
Yes. The COE would be engaged with modelers on the modeling technologies and inputs in a similar fashion as insurers and reinsurers and have access to the same modeling documentation to develop internal expertise. It is possible that insurers could be involved in model-related discussions with the COE, but the COE will not review individual insurer’s use of models.
Is the CIPR planning to license and use modeler software or engage in paid consulting studies for their research and development of processes?
Yes, depending on COE resources and the specific research use case. The CIPR would be willing to either license modeler software and/or engage in paid consulting studies for research and educational/training purposes, as directed by the appropriate NAIC authorities.
How will results and underlying assumptions from licensed models be communicated to state insurance regulators?
Any use of a licensed model, including distribution of modeled results, would be subject to the model license agreement and/or model vendor negotiated research consulting contract. Underlying assumptions from the various models utilized would be collected via the model technical documentation as part of the model vendor data use agreement. Note that it is possible that the model technical documentation, including underlying model assumptions, could be collected through a COE data use agreement without an associated model-based research project. If we were to license a model, the actual model would not be posted on the state insurance regulator-only website.
Will modelers be involved in establishing workflows, best practices, agendas, and expectations of the COE, including timing?
We anticipate that modelers will be actively engaged with the COE staff, advising on these items as appropriate.
How many vendors is the COE considering supporting?
The COE will not be “supporting” vendors, but rather the COE will collect model documentation and engage with model vendors. The COE will engage with any model vendor serving insurance markets where the information is relevant to state insurance regulators.
Does the COE anticipate looking to external experts for some of the implementation or ongoing work?
Yes. External collaboration would be welcome, whether that be with industry experts, public agencies, or the academic community.
How many states do you expect to be interfacing with the COE?
The COE will be a resource of the NAIC potentially interfacing with all 56 jurisdictions.
Beyond recruiting for the identified new roles of CAT modeling relationship manager and CAT model research analyst, how many people at the NAIC/CIPR will be contributing to COE activities? Do you expect that to change over time?
The CIPR director, the NAIC solvency enterprise risk management (ERM) advisor, and potentially Property and Casualty Insurance (C) Committee staff support will have a role in supporting the work of the COE. We anticipate that additional technical and administrative support resources may be necessary as the workload and demand for services evolve with demonstrated success.
Will the staffing level proposed by the NAIC be able to provide meaningful analysis in the broad category of catastrophe modeling?
Prior to the creation of the COE, CIPR and NAIC staff have provided meaningful analysis on wildfire CAT modeling and applied wildfire resilience research. We aim to build off this success and need to start somewhere. Every little bit helps for the states, as stated by one industry commenter, “[t]he staffing issues mentioned above regarding experts at the NAIC are even larger for state insurance departments. Most states are not going to have enough or the right staff to review these models. They will have to rely on others to evaluate catastrophe model validity, and most likely will have to rely heavily on the decisions and evaluations made by others.”
Have long-term plans been prepared? Are there budget implications?
No long-term plan has been developed for the COE. The expenses associated with the COE would be subject to the NAIC budget process and have no special assessments or fees for service.
On October 6 the Washington Office of the Insurance Commissioner hosted its Climate Summit 2021. The recording is available here: https://www.youtube.com/watch?v=yPrO7XkzgvM&t=0s
On October 13 & 14 the Connecticut Insurance Department held its Conference on Climate Change and Insurance. The recording is available here: https://portal.ct.gov/CIDClimateConference?language=en_US
On November 22 The New York Department of Financial Services conducted a webinar to provide an overview of its Guidance for New York Domestic Insurers on Managing the Financial Risks from Climate Change. The recording will be linked as soon as it is available.